8 Essential Steps to Becoming a Payment Facilitator
Today, many software providers are seeking to incorporate payments into their offerings with the goal of delivering incremental value to their clients and gaining additional revenue for themselves. These providers are in a unique position to make this happen, thanks to a deep understanding of clients’ needs, sector challenges, and internal processes. Plus, becoming a payment facilitator represents a key opportunity for providers to strengthen their existing client relationships.
As a payment facilitator, enterprises such as SaaS companies, Independent Software Vendors (ISVs), and Independent Sales Organizations (ISOs) can integrate payment functionality into their solutions. In most cases, the existing software already enables multiple capabilities including: payroll processing, inventory management, and appointment setting. By adding payments to that list, software providers can streamline operations and strengthen loyalty by offering potential cost savings to clients.
Preparation
Following a thoughtful, systematic process is critical to successfully becoming a payment facilitator. By understanding and preparing for this process, software providers can help ensure the necessary capabilities are in place to accommodate present needs and future opportunities.
1. Identify your clients’ specific needs
As a first step, assess the functional coverage needed with an eye toward growth. If there are specific or unique needs that are relevant to your customers, address them at the outset. For example, the needs of a restaurant are distinct from what a retailer might require.
By developing a detailed list, you’ll be able to better anticipate the current and future needs of your clients. Keep in mind that the ability of card schemes to accommodate a variety of payment capabilities elevates its value proposition. For more information, visit the Discover® Network website to learn about our partnerships with payment providers.
2. Register as a payment facilitator
Next, register as a payment facilitator with an acquiring bank in the necessary markets in which you operate. Visit the Discover® Network Find an Acquirer page for more information. Consider working with a payment facilitator platform to support and simplify the process.
3. Focus on card acceptance: local to global
As you build out the capabilities, consider which cards you will accept, as this may help reduce shopping cart abandonment. In a recent consumer survey, 63% of respondents stated that using a preferred payment method is the number one factor that would influence them to complete a purchase.1 Consumer surveys consistently show that customers demand to make payments seamlessly via their preferred method and may fault merchants if they are unable to do so.
To accommodate international customers, enable all Discover Network IIN (BIN) ranges to accept transactions around the world. Our Global Network has 30 Network Alliances* and there are 378+ million cards worldwide.** In 2024, our Global Network facilitated $622B in transaction volume.*** This worldwide acceptance will benefit both you as a payment facilitator and your merchants.
4. Set your policies and terms
Among the keys to establishing your relationship with merchants will be setting out your processing terms, costs, and fees. You will need to identify and work closely with a payment facilitator platform or processing partner. Since the acquiring bank ultimately assumes the risks of the payment facilitator, the bank will require assurance that the payment facilitator has the tools and policies to succeed.
5. Complete documentation and insurance
Complete the underwriting process with the acquiring bank, presenting documentation for things such as your financial credentials and anticipated transaction processing volumes. As you work through this process, you’ll also need to provide details of your operations model. Because payment facilitators are liable for the financial risks associated with merchant transactions, general liability and cyber insurance will be required.
6. Assess technical capabilities of various payment methods
Be sure to assess the technical capabilities per payment method, including contactless transactions, digital wallets, debit cards, and tokenization, as well as an account updater solution for existing customers. Each of these has specific requirements. Discover® Digital Exchange (DDX), a scalable platform that enables a seamless digital payment experience, can help payment facilitators work through the requirements needed for this assessment.
E-commerce transactions require careful considerations regarding the security of transactions and risk control. By incorporating the right technology, such as EMVCo’s Secure Remote Commerce (SRC), security can be enhanced for every transaction. Additional protections might also include D-PAS Connect and ProtectBuy from Discover® Network.
Operations
Because you will maintain full control over your merchants’ processing experience and fund/settlement disbursements, you will want to design a system that manages, monitors, and supports the entire merchant lifecycle.
7. Select a payment gateway partnership
Creating the merchant dashboard and payout system can be time-consuming and costly, requiring multiple resources. Whichever option you choose for building out your capabilities, you’ll need to ensure that you meet the transaction specifications, including security measures, for the necessary card networks. Additionally, you’ll need to account for the unique operational design and architecture requirements of your client.
Choose from three options:
- Full-service solution
By choosing a full-service solution, payment facilitators can quickly add turnkey payment capabilities across merchant categories. The solution provides software integration, risk management, operational support, and settlement—leaving Independent Software Vendors (ISVs) responsible only for passing along client information and completing account setup.
- Proprietary solution
Proprietary solutions are built and managed entirely in-house. ISVs own every aspect—from software and onboarding to risk management and settlement—gaining maximum control but also assuming full responsibility for compliance, operations, and support.
- Hybrid solution
With a hybrid model, ISVs retain control of merchant onboarding while the provider manages risk, settlement, and other operations. This balance allows ISVs to streamline account onboarding while relying on the provider for critical infrastructure and compliance.
Implementation
With your infrastructure in place, it’s time to meet regulatory requirements and receive compliance approvals. Each country has its own licensing rules, and responsibility depends on your PayFac model: Using a proprietary solution means managing your own compliance, full-service providers handle compliance for you, and hybrid models can vary by provider.
8. Know your customers and protect your data
Because of the potential liability associated with being a payment facilitator, you must take steps to continually monitor transactions for money laundering and terrorist financing by complying with Know Your Customer (KYC) and Anti Money Laundering (AML) procedures, among others. For those operating outside the U.S., there are additional compliance requirements—for example, PSD3 in Europe. Regardless of the market, data security is a must. As such, you’ll need to receive Level 1 PCI DSS certification and a Money Transmitter License (MTL). In the U.S., MTLs are issued at the state level, so the process for obtaining one varies from state to state.
Finally, you’ll need to incorporate protection against Card-Not-Present (CNP) fraud, which could include implementing payment solutions that leverage the latest smart authentication technologies. If chargebacks are initiated, you’ll need to provide evidence to the card networks that back your merchants.
Incorporating payment functionality into an ISV’s existing solution requires a measured approach that addresses the needs of today—and features the scalability necessary to address the demands of tomorrow. System design and functionality are keys to meeting the day-to-day requirements that set the foundation for frictionless transactions and keep essential commerce flowing.
By following these steps, you can navigate an efficient process that minimizes costs and disruptions, while enhancing client satisfaction and loyalty. Furthermore, as a payment facilitator, you can gain data-driven insights as well as the potential to streamline operations for your clients—all while generating incremental sources of revenue for your business. For more information about Discover® Network, visit discoverglobalnetwork.com.
- 451 Research and Discover® Network Consumer Fintech Global Survey, 2024.
* Based on signed Network Alliance Agreements
** Total cards include open cards on Discover Network, Diners Club International and network alliances. Based on information provided by network participants, and RBR Data Services published as of 2024.
*** Discover Financial Services Earning Summary, 2024.
The information provided herein is sponsored by Discover® Network. It is intended for informational purposes and is not intended as a substitute for professional advice.